You’d think a business like Square, which operates in the highly regulated field of financial services, would be scrupulous about making sure its paperwork is all up to date.
Maybe. Maybe not!
We recently uncovered a filing Square made with the state of Alaska in October 2011. Alaska requires corporations doing business in the state to reveal their officers, directors, and major shareholders. Square complied, and we thereby learned who owned how much of Square.
That’s really interesting information, since Square’s last venture-capital round valued it at $1.6 billion and its next round—if it manages to raise it—could be at a valuation of anywhere from $2.5 billion to $4 billion.
Square didn’t think the filing was that interesting. Spokesman Ricardo Reyes told us that it wasn’t accurate.
So we called the state of Alaska’s Department of Commerce.
Kathy Fagerstrom, the program coordinator for corporations and business licensing, confirmed the accuracy of the filing.
“We accept these documents based on good faith,” Fagerstrom said. “They’re supposed to provide us with the correct information.”
Well, suppose the information changed between October 2011 and the present?
There are all kinds of scenarios where the ownership percentages might change slightly—for example, if a founder sold some of his stake in the secondary market.
Or maybe—just maybe—Square actually has raised the new financing it’s seeking.
Justin Byers, a research analyst with VC Experts, told us that if Square is issuing shares to investors—even private investors—it has 15 days to file Regulation D forms with the Securities & Exchange Commission. It also must update its articles of incorporation and file those with the State of Delaware.
No such filings have shown up yet.
In any case, Fagerstrom said, companies have a statutory obligation to file a notice of change with the department if its list of major shareholders changes. But according to Alaska Statute 10.06.813—yes, we read obscure state statutes all the time, it’s what we do—Square can delay such a filing until January 2, 2013.
That appears to be what’s happened here.
“We are in compliance of Alaskan law,” said Reyes.
Since Alaskan law requires filings to be accurate, we are reading Reyes’s statement to mean the following:
- The breakdown of ownership it reported to Alaska was accurate when filed in October 2011.
- Something has happened to change Square’s ownership structure in the meantime.
- Square really doesn’t want to talk about what that something is.
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